What's the Functions and Scope of Material Management? Discover It's Top Functions and Identify Scope of Applications!
2. How Material Planning is carried out?
Material planning is deciding in advance the requirements of raw materials, ancillary parts and components, spares etc., as directed by the production programme. The basis of material planning is generally a production plan based on demand forecasts for finished goods. Requirements of various items of materials are decided by exploding a master production schedule for a planning period.
Materials budget becomes the tool of control. Materials planning both in terms of quality and value, tries to avoid the practice of crisis management. Materials planning process is influenced by a large number of factors, foreign exchange regulations, import policy, Corporate objectives, demand and supply of the item, total lead time, working capital, storage capacity, plant utilisation etc. Materials planning ensures availability of the right type of material in the right quantity at proper time.
3. What's exactly Purchasing and Procurement in Material Management?
The purchasing function of materials management is concerned with the procurement of proper equipment, materials and supplies of the right quantities, at the right time. In view of the complex nature of the manufacturing activities today, purchasing has become a specialised function. In large concerns, major activities consist of ordering materials upon requisition by the users, checking receipt of the material and maintaining files and records of orders and price movements.
4.What's exactly Receiving and Inspection of Materials?
The purchasing department is normally responsible for materials up to the point where they are ready for production use. The receiving department has specific responsibility for the expeditious receipt, identification and general inspection of all incoming materials. Receiving department is also responsible for promptly notifying all interested parties of the receipt and condition of incoming materials. Receiving is a clerical operation.
Receiving is an important control point in a firm’s materials system. The receiving clerk can detect those suppliers who meet only the minimum standards of quality. Receiving records show which suppliers are consistently late in their deliveries, which have the maximum number of rejects, and which deliver the greatest number of split shipments.
5. How important is Storing of Material and Management?
After receiving and inspecting the materials the next important aspect of materials management is storekeeping. A storehouse is a building provided for preserving materials.
Storekeeping is the physical storage of goods. It relates to preserving raw materials, work-in-progress and finished goods in the stores.
It is a very important function of materials management. When management neglects the control of inventories, its operations and costs go out of hand. Inventories require high cost and investment commitments. It is a necessary evil.
But inventories make possible the smooth and efficient operation of a manufacturing organisation. Materials manager understands that well-planned and effectively controlled inventories can contribute to a firm’s profits. The real problem is to determine the inventory level at which money invested in inventory produces a higher rate of return. Excess inventory increases the cost whereas inventory less than requirement hampers the production process. Both are harmful for the firm. Hence, inventories must be maintained at the optimum level. In attaining the optimum level of inventories, its costs and benefits have to be balanced against one another.
The materials manager employs this tool to analyse the functional utility of materials to be purchased. He ascertains whether the materials purchased have good values for money, for the required purpose.
Value analysis aims at identifying unnecessary costs and eliminating the same without affecting the functional utility of material. In value analysis, the materials manager identifies the function of a product, examines alternative ways by which the function can be accomplished and finally chooses that which involves the least cost. Value analysis correlates the cost of purchasing a product with its end-use. It attempts to examine critically the make up of every item which contributes towards the cost of the product and whether this cost contributes to the function appropriately.
7. How Value Analysis is utilised in Material Management?
It is yet another function of materials management. To perform this function smoothly, a separate section is normally established. A poor materials handling system results in accumulation of work-in-process. Materials handling accounts for 40% of the total cost of production.
Though materials handling adds no value to the end product, it may help in reducing the cost of production. Delays check the speed which leads to idling of materials and slowing down the production.
Transport and traffic function has a vital role to play in materials management. Well-planned transport management contributes to the smooth running of manufacturing plants.
Transportation is the management of the movement of goods and materials through space and time from their original source to the ultimate destination. Its cost ranges between 10% to 20% of the cost of an item. Transport section ensures the movement of raw materials to plant and carrying of finished goods to markets.
A materials manager knows that developing specifications and standards can contribute significantly to the firm's profitability. Specifications are detailed descriptions of the materials, parts, and components used in making a product.
The use of standards permits a firm to purchase fewer items, in large quantities, and at lower prices. The purchase of standardised materials saves money in three ways: lower prices, lower processing costs, and lower inventory costs.
The materials function is evaluated on the basis of its contribution made in the field of production. Also, if the organisation succeeds, the materials management is regarded to have proved his worth or it has carried out its job effectively.
Materials management is a complex process that includes procurement, transportation, and inventory management from manufacturer to storefront. Overseeing the materials initial purchase through internal operations then to the service point and on through distribution can often be a labor-intensive task. Here are a few tips that can help that process run more smoothly.
1. Establishing proper order processes
It's essential for companies to know the current amount of materials they have in stock at all times. Without an accurate calculation of supplies, a company will not know the replenishment amount needed to meet demand while placing material reorders. Effective order processing requires that a company has an accurate estimate of their turnover rate. With this knowledge, a company can establish order frequency calculations to ensure they always have enough inventory on hand to meet the turnover demand.
2. Don't Shy Away From Analytics
While maintaining inventory is critical, handling the financial aspects of materials management is just as important. Companies should implement an accounting inventory system that tracks each movement of inventory items, such as each purchase, sale, or adjustment. Along with tracking, it's great to update inventory financial figures monthly; this gives your company data on the amount of inventory being carried in order to manage the cost of carrying the inventory which can easily exceed 10% of the inventory value.
3. Obtain Quality Suppliers
A lack of continuity of supplies can be a difficult situation for a company to overcome. That's why it is important for material managers to find suppliers that can reliably fill a company’s supply needs. A crucial role of the suppliers is to fill a company’s orders on time according to an agreed upon lead time in order for the company to meet consumer demand. If a company cannot satisfy demand during periods of replenishment they will lose sales to their competitors.
4. Cost Savings Make a Difference
A majority of the labor-intensive tasks performed in materials management comes from obtaining the best pricing. A successful material manager needs to find the lowest possible prices, consistent with quality and value requirement for purchased materials. They must do this without increasing other costs. Remember:
- Contain the costs inventory
- Maintain high turnover of inventory
- Seek low procurement and storage costs consistent with quality and delivery requirements
5. Time Every Move You Make
A lot of material management success is due to timing. Whether it be assuring prompt and dependable deliveries or keeping up with your monthly financial figures, timing can hinder or propel your success. Timing is most effective when forecasting needed items. Make sure you are meeting customer demand as they arise while avoiding overstocking during periods of low demand that increase your inventory costs.
- Lookout for quality suppliers.
- A regular flow of supply can keep the company thriving.
- Proper order process.
- The customers' demands keep on fluctuating on proper supply chain.
- Proper analysis.
- It is an essential step for the material manager to carry out different analysis.
- Cost savings a plus initiatives for Material Management.
Q. Why Material Management is Important in Supply Chain?
Ans. Material Management is an important element in the supply chain since it ensures the high quality of the raw materials used in production as well as the economical use of those resources.
JIT Inventory Management
Just-in-Time is an inventory management method that involves delivering goods as soon as they are needed.
JIT allows companies and organizations to minimize the number of goods they have with them before they are needed, reducing risk. Generally, it is an excellent way for companies to save money, improve efficiency and reduce risk if done correctly.
To effectively manage materials, businesses must have a clear understanding of their supply chain and the materials that are used in it. They must have a plan for the procurement, storage and distribution of materials and be able to track and monitor the materials at all times.
One of the biggest risks of JIT is that it makes the difference between what was planned and what happened even bigger. Designating the job of material management can reduce the possibility of some of these risks.
Reduction of Material Waste
By managing the timing of material delivery and overseeing inventory, material managers can reduce receiving errors and waste.
By controlling the materials used, it’s possible to reduce the cost of materials and the time it takes to produce goods and services. It reduces the cost of manufacturing. This also helps to increase the efficiency and productivity of the entire supply chain.
Increased Inventory Accuracy
The knowledge of accurate direct material inventory levels can help reduce inventory loss and increase production efficiency. Preventing the loss of materials is an important step in reducing the cost of raw materials.
Optimization of Material Transport
By focusing on better management techniques and creating specialized materials management departments, production companies can fully utilize the transportation of materials and the supply chain.
By controlling the materials used, it’s possible to ensure that customers receive the products and services they expect as efficiently and cost-effectively as possible.
This optimization is done by choosing the correct warehouses and using good transportation methods. Optimizing material transport can assist in providing a more consistent raw material flow for manufacturers.
Materials and Logistics Management by L. C. Jhamb
Handbook Of Materials Management by Gopalkrishnan
Introduction To Materials Management reference book by Tony Arnold
Materials & Logistics Management reference book By Dr. Kasande
Materials Management: Procedures, Text & Cases by A. K. Datta
Purchasing & Materials Management by Gopalakrishnan
Materials and Logistics Management reference book by
Saroj Kumar
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